Moving overseas can be an exciting adventure, but it can also be a complex and stressful process.
It may feel as simple as finding accommodation, choosing an international removal company, and settling into a new environment. However, you need to consider the tax implications of your move. Whether you are planning to move abroad permanently or temporarily as a UK resident, we hope to provide you with essential overseas tax advice to help you navigate the process smoothly.
Overview of the UK Tax System
If you live in the UK currently, you might already be familiar with the UK tax system. However, before delving into the tax implications of moving overseas, let’s start with a brief overview of the UK system. The UK tax system comprises different taxes that apply to individuals and businesses. These include income, national insurance contributions, value-added tax (VAT), corporation, and capital gains tax.
As a UK resident, you’re required to pay tax on your worldwide income, which means that you need to declare your income from both UK and foreign sources. However, if you are a non-UK resident, you only need to pay tax on your income from UK sources.
Moving Overseas Tax Checklist
When moving or retiring overseas, you must ensure you’ve told all relevant offices of your move. From notifying the HMRC of your departure to understanding how your tax status changes, this checklist is designed to help you navigate the complex world of international tax requirements and ensure that you don’t miss any important steps.
When moving abroad, you must inform the HMRC. The form you submit to tell the HMRC depends on whether you usually complete a self-assessment tax return.
If you do not usually complete a self-assessment tax return, you must complete a P85 form.
If you usually complete a self-assessment tax return, then you should inform the HMRC through this. To do so, you must complete the resident sections (SA109). There is a penalty if you don’t complete this before 31st October.
Additional steps
When moving or retiring overseas, you must ensure you’ve told all relevant offices of your move.
Tell the council – Contact your local council about your move and change the council tax. You also need to give the council a forwarding address.
Benefits – If receiving benefits, you must contact relevant benefits offices to inform them of your move. They will check whether you can continue to receive benefits aboard.
Pension – If you are retiring aboard, contact the International Pension Centre.
Student loans company – If you have a student loan, contact the company to tell them about your move abroad and ensure you will pay the right amount.
Tax Implications When Moving Overseas
There are several tax implications to consider when moving abroad. Once you’ve informed the HMRC of your move, they will consider your residency based on the length of time you spend in the UK and your ties to the country. For example, owning property, being registered with a UK doctor or having a UK bank account. If they determine that you are a UK tax resident, then you may find yourself paying tax to the UK and your new country of residence on all income earned (including income received from overseas employment). This is referred to as double taxation. If you are classed as a non-UK resident, you will only pay tax on money that is earned in the UK, for example, leasing out a property.
Double taxation can be a concern because it means paying taxes on the same income in both the UK and your new country of residence. However, many countries have Double Tax Agreements (DTA) to avoid this situation. These agreements aim to prevent double taxation by clarifying which country has the right to tax certain types of income. If you’re subject to taxes in both countries, you can usually claim relief under the relevant DTA to avoid being taxed twice. This can help ensure you’re not paying more tax than necessary.
Planning a move abroad can be an exciting experience, but you also need to consider its financial implications. Navigating the complexities of international tax laws can be daunting, but with proper planning and informed decisions, you can minimise your overseas tax burden and avoid any legal pitfalls.
If you are looking for more tips on moving abroad, Bishop’s Move is here to help. With over 170 years of removals experience, we are the experts you can count on. To read more, check out our 10 tips for moving abroad to fully prepare for your global adventure.
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